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Consumer lender Bajaj Finance is ready to flex its muscles in the payments market. This has the potential to turn up the heat on a host of fintech players, especially at a time when regulatory glare has increased on digital loan apps.

The non-banking financial company (NBFC) said that it will launch Bajaj Pay in the fourth quarter, which will act as a single-point access to a slew of payment solutions from unified payment interface to credit cards.

“We want to build an omnichannel for all financial products. We are a regulated business and not a payments business and hence this omnichannel approach will work. We need to seamlessly connect offline and online channels," said Rajeev Jain, managing director, Bajaj Finance, in a post-result call with analysts.

Worrying signs
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Worrying signs

The payments market is rife with players from Google, which offers services based on UPI, to banks such as SBI, which offer a wider set of proprietary and group company products on their apps. Payment platforms have acted as that extra booster to lending business of banks and finance companies. For Bajaj Finance, too, the payments business would serve as a springboard to its lending business growth, according to analysts.

But the management was quick to add that its growth in FY22 is not contingent on its payment plans and that the lender isn’t planning to compete with others. “We are not looking to fight where the big elephants are fighting," added Jain.

Meanwhile, its lending business has managed to recover fast from the pandemic’s blow with most of the loan categories having bounced back close to pre-pandemic levels. On an assets under management basis, consumer loans and home loans were back to pre-covid levels, while sales finance lending and auto finance were still weak. That said, the growth metrics were already expected by investors, which is reflected in the sharp rise in shares in the past three months.

What should worry investors is the trouble on the asset quality front. Bajaj Finance wrote off loans worth 1,970 crore or 1.5% of its book. Including interest forgone, the write-off amounted to 2,335 crore in the December quarter. Adjusting for the judicial standstill on bad loan recognition due to a pending Supreme Court judgment, the lender’s gross bad loans rose sharply to 2.86% of its book. Stress is large in auto loans, mainly two- and three-wheeler lending. Consumer loans too are not yet out of the woods. The management has attempted to assuage the concerns by pointing out to its adequate provisioning. Provisions of 1,352 crore were made for Q3 and are expected to increase mildly in Q4.

It is clear that Bajaj Finance is clawing its way out of the pandemic. To hasten this process, the lender has opted to boost its payments infrastructure. It remains to be seen to what extent the payments move will offset concerns over asset quality.

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